New Companies Bill to be more business-friendly

CONDUCTING AND STARTING up businesses in Malaysia will be so much easier with the new Bill, to be designated as `Companies Act 2011', expected to be tabled in next year's Parliamentary seating.

This new Companies Bill, which will replace the existing 35-year old Companies Act 1965, is in line with the government's aspiration to ensure that the corporate law framework maintains its edge in attracting foreign and domestic investments, expanding entrepreneurship and also aims to ease and cheapen the cost of doing business in Malaysia, whilst giving strong emphasis on corporate governance.

The Companies Commission of Malaysia (CCM) has agreed to adopt a total of 183 out of 188 recommendations (97%) by the Corporate Law Reform Committee, which was submitted to CCM on Oct 20, 2008 to be included in the new Act.

CCM has targeted to further reduce the number of days for setting up a business from three days to one. Hence, going e-centric will be a huge feature for the formation of companies.

Other significant features include having a flat and cheaper fee for public and private companies to be formed as well as including corporate social responsibility into the act.

The new Companies Bill will be divided into six chapters as follows:

Chapter 1 - Preliminaries

Chapter 2 - Formation of Companies

Chapter 3 - Management of Companies

Chapter 4 - Company Rescue Mechanisms

Chapter 5 - Closing of Companies

Chapter 6 - Miscellaneous

This new structure will greatly facilitate the stakeholders' understanding of the content, concept and requirements of the Companies Act. CCM chief executive officer Datuk Azmi Ariffin said the new laws would be friendlier to small- and medium- scale enterprises (SMEs) by reducing costs and improving management efficiency as companies would no longer need to hold annual general assemblies.

He said increasing the number of SMEs was the goal, even though the move to reduce the cost of forming new companies would result in multi-million ringgit losses.

He added that 99.2 per cent of 900,000 companies registered with CCM comprised of SMEs and this amendment would change the nation's corporate landscape.

CCM policies to be used in legislative changes*

POLICY STATEMENT 1

To introduce new company laws that are modern and dynamic through one act covering all companies without taking the ownership structures and economic capacities of said companies into account.

POLICY STATEMENT 2

Simplify business start-up through modernising laws and procedures related to incorporation by providing unlimited capacity, abolishing constructive notice doctrines except in certain cases, allowing incorporation by a member or stakeholder, easing approval processes for naming companies and making name reservation an option.

POLICY STATEMENT 3

Simplify business start-up through the introduction of the no par value regime.

POLICY STATEMENT 4

Simplify the restructuring of company share composition by introducing alternative procedures to reduce capital, the renewing of regulations related to buying back of shares, and financial assistance through solvency tests.

POLICY STATEMENT 5

Simplify the process of a company's internal decision making by abolishing the mandatory requirement to hold annual general assemblies, restructuring procedures of written resolutions used on private companies by abolishing the unanimity ruling in the approval of the said written resolutions, as well as improving and explaining rulings related to meeting procedures.

POLICY STATEMENT 6

Strengthen corporate administrative structures through the consolidation of the roles and responsibilities of a director.

POLICY STATEMENT 7

Consolidation of corporate administrative structures through acknowledgment of roles, functions and responsibilities of a company secretary and the need to raise the standard and professionalism of company secretaries.

Strengthen corporate administrative structures by refining the roles and responsibilities of auditors.

POLICY STATEMENT 12

Consolidate practices of corporate administrations by emphasising the importance of auditing the financial statement and the disclosure of information within the set time frame.

POLICY STATEMENT 13

Strengthen practices of corporate administrations by improving and explaining rulings related to the involvement of the director and significant shareholders.

POLICY STATEMENT 14

Simplify, clarify and speed up the process of company winding down to shorten the duration taken to wind down a company, protecting company assets from liquidation by introducing and setting exempt dispositions, and clarifying undue preference transactions.

Restructure the scheme of arrangement concept between the company and its creditors.

POLICY STATEMENT 17

Enforce the roles of receivers and managers in the receiving process of the company by explaining the receiver's power and status and introducing new allocations regarding liability, indemnification and prioritising receiver's limited costs.

Modernise enforcement regimes by introducing civil and administrative proceeding concepts to selected provisions of the Companies Act, which can be enforced with criminal sentencing, to impose punishment on company officials who are involved in crime and not the company, and to consolidate regulations relating to the impeachment of directors.